The total number of home sales in BC is set to beat 2005’s record of 106,310 units, with 113,800 homes forecast to be sold this year, up 11 per cent from 2015, according to the latest quarterly forecast issued by the British Columbia Real Estate Association (BCREA) November 29.
However, the association forecasts that “less robust economic conditions combined with government policy restraints” will mean residential transactions drop by more than 15 per cent to 96,300 across the province in 2017. This is still well above the 10-year average of 85,000 sales, the BCREA pointed out.
The association’s forecast report said, “Policy headwinds will be a negative influence on the BC housing market in 2017, especially in Metro Vancouver where a 15 per cent tax on foreign nationals curbs that market segment. This combined with the third tier of the Property Transfer Tax (PTT) applying an incremental 3 per cent tax on the purchase of homes priced over $2 million will likely moderate demand at the high end of the market. First-time and other low-equity home buyers will also be constrained by higher mortgage qualification requirements that could pull as much as 20 per cent of the purchasing power from this vital buyer group.”
Cameron Muir, BCREA chief economist, said, “Housing demand across the province is expected to moderate next year as declining affordability related to rising prices and government policy interventions limit the number of eligible buyers.
“However, while home sales are not expected to repeat this year’s record performance, consumer demand is expected to remain well above the 10-year average.”
Falling Average Sale Price
The BCREA added that this easing in demand will combine with rising new home completions to mean there is less competition for homes, and that there will be a reduction in the average home sale price.
The report said, “Market conditions are expected to trend toward greater balance in the face of moderating demand and rising new home completions. While the average MLS® residential price is forecast to decline 6.4 per cent to $645,000 in 2017, most of that change will be due to relatively fewer higher priced homes selling in highly populated regions, particularly Metro Vancouver.”
The association also offered a retrospective breakdown of home sales by price, year to date, from January to October 2016. It found that more than 70 per cent of Metro Vancouver residential transactions were for less than $1 million, with 35.8 per cent of homes sold for less than $500,000 and 3.9 per cent sold for more than $3 million.
Robust Household Finances
The report added that although high home prices combined with low interest rates have meant BC households taking on high mortgage debts, “BC households are not showing signs of financial stress.”
It said, “Mortgage arrears have trended lower while consumer bankruptcies are at their lowest level in a decade. Low interest rates have kept debt-servicing costs low and stable while a growing economy and unemployment at an eight-year low have further buttressed household financial stability.”
To read the full BCREA report, click here.